Mechanics, the freeze is reality: production down by 2.1%

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Having archived the first half year with a fluctuating trend, the engineering production activity worsened in the third quarter. Forecasts for the coming months are also negative, thanks to the uncertainty surrounding the increases in energy and raw material prices due to the extension of the war in Ukraine, and China’s “zero Covid” policy. Between July and September, the production volumes compared to the previous quarter showed substantial stability (+0.1%) – with a slowing down trend after +1.1% in the second compared to the first quarter -, while in comparison with the same period of 2021 there was a drop of 2.1% (after -1.2% in the previous quarter).

The Federmeccanica observatory, presented yesterday in Rome by the general manager Stefano Franchi, shows how overall in the period January-September 2022 metalworking production decreased on average by 0.6% compared to the first nine months of 2021, against the positive change in entire industrial sector (+0.8%). “A perfect storm is looming that is lapping up our sector – Franchi summarized -, the picture is worrying and the resilience capacity of our companies is progressively thinning”.

Looking at the individual sectors, in the first nine months of the year the activities of Metallurgy decreased (-7.9% on the same period of 2021), the manufacture of metal products (-3.9%) and electrical machinery and appliances (-2.8%), the production of motor vehicles and trailers (-1.6%). A plus sign, however, for the manufacture of computers, radio and TV, medical and precision instruments (+7.2%), other means of transport (+3.5%).

We go against the trend compared to the other countries of the European Union, considering that metalworking production on average increased by 1.8% compared to the first nine months of 2021. In more detail, compared to our -0.6%, the Spain marks +2.5%, France +1.4%, and Germany +0.9%. Even on a strong point of our mechanics, exports, the sign remains positive, but is gradually slowing down: the increase in January-September is 13.5% over the same period of 2021, with an attenuating trend in single quarters, while imports grew by 23.2%. The greatest increase in exports is to EU countries (+15%) compared to non-EU countries (+11.8%). Direct flows to Germany increased by 13.1%, those to Spain by 20.8%, and to the USA (+25.3%). Flows for Russia (-19.5%) and China (-4.3%) are down.

Looking to the future, the survey conducted among companies reveals expectations of a contraction in production and employment. 83% had significant impacts on production costs from raw material price increases, which in 8% of cases will lead to business interruption (7% in the last survey), in 51% to work reorganization and in 23% % to the reduction of investments. 26% of companies expect increases in production, compared to 28% who predict reductions: the negative balance brings us back to the full extent of the pandemic. 23% of the companies interviewed are satisfied with the order book, up from 27% in the previous survey. 17% believe they need to increase employment levels in the next six months (compared to the previous 21%). The share of companies that judge corporate liquidity “bad or very bad” is growing: 14%, similar to the figure after the lockdown.